WITH all the doom and gloom about advertising, particularly display advertising, the launch of new magazines by William Reed, along with increases in investment and editorial headcount might seem out of step.
But what makes it all stack up in its growing drinks and hospitality division is the buoyancy of the sector it serves.
Unlike other industries such as grocery and retail, it has been broadly unaffected by consolidation. This translates into a market that is full of independent owner-operators who represent a ‘community’ that suppliers want to reach through display advertising.
It is these display ads that represent the core revenue stream for the company’s titles, says Russell Dodd, publisher of the drinks and hospitality division, who is quick to dispel the myth that such ads have had their day.
"In my world, reports of the demise of display ads are vastly over-rated," says Dodd. "Since we re-launched Morning Advertiser in 2000 we’ve grown it considerably, to £4 million revenue from virtually nothing."
Underpinning this growth, according to Dodd, is the credibility of the editorial, which is at the heart of the William Reed company philosophy: "We put lots into editorial as you’ve got to get the hearts and minds of your readers. Everything falls off editorial.
Cynical publishing is short-lived — it won’t work.
You have to invest editorially."
Injecting a little entertainment and a bit of good old gossip into the trade magazine sector is one of Dodd’s objectives.
Much has happened since this independent family-owned operator launched its first magazine, The Grocer, in 1862 and its view today is that trade publications have moved on from being essential news organs to be more about entertainment.
So you are likely to find increasing space for gossip and more prominence given to the letters pages than has typically been the case in the staid business-tobusiness arena. And Dodd is eager to bring this touch of pizzazz to more business magazines.
He says: "We believe there is no such thing as must-have news information in magazines. You’re likely to get it by email today. There was this big thing in the ’90s of must-have news — but what has happened to it? We inform but also entertain because just reading about business-building is so dreary. You’ve got to entertain your readers."
This thinking is being introduced to an increasing number of titles as Dodd is overseeing a period of unprecedented activity at William Reed’s hospitality division, with its development budgets having increased 240 per cent over the past two years.
During this period it has bought the newsletters of Martin Info (Leisure Report, M&C Report and Hotel Report) as well as Wine & Spirits International and Wine & Spirits magazines. William Reed also bought Quantum Business Media’s Hotel & Restaurant magazine in March last year, but folded it before launching the glossy H — The Hotel Magazine last month (PG 10 March).
As well as investing in these new titles, William Reed has also increased the spending on its existing drinks titles (such as the Morning Advertiser and Off Licence News) by 46 per cent over the past two years, with 18 new editorial staff added. When revenue from the recently acquired Restaurant magazine is added to the pot, this investment will have helped push the division’s turnover for 2005/2006 to around £8.6 million from £7.16 million.
However, attracting the all-important display ads only works if each magazine is targeted at sufficiently small, niche communities. "It would be great if one magazine fed all parts of the [hospitality] sector, but it doesn’t work like that. If Restaurant magazine suddenly wanted to also attract contract catering [ads] then it would fail," explains Dodd.
With its array of titles in the sector, he reckons the company is now the leader in a variety of its niches.
Once these are captured, Dodd says the barrier to entry for competitors looking to move in and grab a slice of the action is raised significantly.
"You need to be market leader because ‘number twos’ simply don’t have the clout," he says.
Although Dodd wonders whether this strategy makes the company "unambitious", it seems a sensible move if his argument that the days of the big paid-for trade magazines are over is true.
He says they are all in sharp decline in terms of copy sales, which is why William Reed titles have a sizeable chunk of controlled circulation — for Restaurant it is 7,000 out of a total circulation of 15,000.
The company has found that, for each of its magazines, the readership could be as low as 8,000 to 10,000 because the viability of a title is based more on the spending power within the community that it is targeting.
The recent launch of H — The Hotel Magazine fits the criteria like a glove, since its editor Mark Hayes says the initial circulation is predicted to be a modest 10,000, but the spending power among these people should be high — as much as 80 per cent of the UK hotel market is in the hands of independents.
Although Dodd admits that this niche title approach is good for display ads, the downside is that it severely limits the potential for the magazines to attract classifieds: "We are narrow and niche so it’s difficult to attract classifieds unlike, say, Caterer & Hotelkeeper, where property and recruitment classifieds are its core areas."
It is therefore essential that you "get money out of suppliers in other ways", he says. At Class magazine the reader events, such as tastings and hosted dinners, account for 37 per cent of revenue, which represents the profit of the magazine.
Dodd hopes to develop brand extensions along the lines of the successful Restaurant magazine’s Top 50 World Restaurants, which was devised by its previous owners and last year gained coverage for the magazine equivalent to £3 million of advertising.
Such activities have led to non-magazine revenue within the drinks and hospitality division increasing by 18 per cent during the 2004/2005 period, and this is forecast to jump an even more impressive 23 per cent this year.
The focus is now on further leveraging the magazines’
brands rather than making further acquisitions, according to Dodd, partly because the company could run into a problem with the competition rules. This thinking could, of course, change if the right target came along.